FOR IMMEDIATE RELEASE: May 14, 2012
SCHUMER: NRG PLAN TO MOTHBALL POWERPLANT COULD COST LOCAL TAXPAYERS MILLIONS IN MISSED PILOT PAYMENTS, LEAVING LOCAL SCHOOLS & TAXPAYERS IN A LURCH – SENATOR CALLS ON NRG TO LIVE UP TO ITS RESPONSIBILITY TO WESTERN NEW YORK
NRG Had Promised To Make $16.6 Million Worth Of Payments In Lieu of Taxes To Chautauqua County, The City of Dunkirk and Local Schools Over the Next Two Years, But Is Seeking To Temporarily Close Plant and Skip Out On Payments
Schumer Calls On NRG To Keep Its Promise And Make The Payments – Failure To Pay Would Be Huge Blow To Local Schools and Governments
Schumer: NRG Benefited From Millions in Federal Tax Breaks At This Plant And Can’t Turn Its Back On Chautauqua County Taxpayers Now
Today, at Dunkirk City Pier, U.S. Senator Charles E. Schumer stood with local officials as he called on NRG Energy to live up to its tax agreement with Chautauqua County and continue payments that are critical to the county, the City of Dunkirk and the school district, in the event that the Dunkirk plant closes temporarily. In March, NRG filed a “mothball application” with the Public Service Commission (PSC), and is seeking to close the plant temporarily, so that the company can save money and skip out on PILOT payments, which the company has agreed to pay the local community instead of taxes. The PSC will review the mothball application over the next few months, and Schumer supports keeping the plant open at its maximum capacity in order to preserve local jobs and a key source of power for the region. In the event that the plant must limit production, Schumer wants to ensure that there is no negative affect on local taxpayers.
Schumer stated that it’s unacceptable for the coal plant to avoid these PILOT payments, which would cause Chautauqua County, the City of Dunkirk and the Dunkirk School District to lose out on approximately $16.6 million over the next two years. NRG is the largest taxpayer in the city of Dunkirk and if the company skips out on these PILOT payments, local taxpayers would be forced to make up for this lost revenue through higher taxes. Schumer will insist that following the PSC review of NRG’s application, and should no other solution be found, NRG should continue to make full PILOT payments to the local community. Schumer also pointed out that Dunkirk Power LLC, a subsidiary of NRG, raised millions of dollars in federal tax-exempt bonds through the Chautauqua County IDA for NRG’s recent emissions control upgrades and publicly cited their PILOT payments to the community as justification for the generous financing. Schumer called on NRG to promise to continue these PILOT payments, which are the lifeblood of the local economy, and to be a responsible corporate partner to the community.
“Our message today is clear – Dunkirk residents and taxpayers have been upstanding community partners to NRG for years, and it would be absolutely unacceptable for NRG to turn its back on the students, residents, and local officials in the community that it calls home,” said Schumer. “In a perfect world, the plant would stay online at full capacity as it has for years. But, if the NRG’s Dunkirk plant is mothballed and they skip out on PILOT payments to Chautauqua County, the city of Dunkirk and the Dunkirk school district, the community could lose over $16 million in the next two years and would be forced to cut critical services and programs that residents rely on. It is particularly compelling to note that NRG benefited from millions of dollars in federal tax-exempt bonds through the Chautauqua County IDA for facility upgrades, and now could choose to turn its back on the same taxpayers that supported such generous financing. Local schools and taxpayers cannot be left in the lurch, and I am calling on NRG to live up to its responsibility and commitment to Dunkirk, and to continue making full PILOT payments to the community if its plant is mothballed.”
Schumer stood with members of the Dunkirk community including Chautauqua County Executive Greg Edwards, Dunkirk Mayor AJ Dolce, and school superintendent Gary Cerne as he called on NRG officials to meet its obligations and continue making PILOT payments to local officials, in the event that their Dunkirk generating station is mothballed in the coming years. The Senator was also joined by community members that would be impacted by this loss of funding, including: teachers and parents, law enforcement officials, first responders, and Dunkirk residents.
"Senator Schumer has always assisted Chautauqua County on important issues. He knows how essential NRG is to the local economy and the necessary role of NRG in the generation of electricity to everyone in New York State", stated County Executive Greg Edwards. "I am pleased to once again welcome Senator Schumer to Chautauqua County and thank him for his support to Chautauqua County and its residents,” he added.
“Every aspect of City government and every resident and taxpayer that utilizes City services is affected in some manner as a result of these PILOT payments. That’s why we’re so grateful that Senator Schumer is fighting to make sure that NRG lives up to its commitments. The significant financial contribution by NRG to the City makes possible all of the extremely important services that the City provides to the public – from police and fire protection, to building and zoning services, to public works projects, including road repair, street-sweeping and snow-plowing,” said Dunkirk Mayor AJ Dolce. “The possibility that the Dunkirk facility would be moth-balled would have an overwhelming direct and residual negative impact on the City, County, School District and all of the residents and businesses in the area.”
“It is difficult, if not painful, to conceive of the impact on our educational system should this revenue be lost,” said Dunkirk Superintendent Gary Cerne. “Significantly higher taxes or further dramatic staff reductions, or any combination of the two, will leave behind a community and educational system that does not adequately serve the needs of its residents, young and old alike. For that reason, we are thankful that Senator Schumer has come to Dunkirk to help our students and community.”
NRG currently makes Payments in Lieu of Taxes (PILOT) to Chautauqua County, the City of Dunkirk and the Dunkirk school district, on which local officials, residents and students heavily rely. Through this PILOT agreement, NRG is expected to pay a total of $8.6 million in 2012; $8.4 million in 2013 and $8.2 million in 2014. That money is broken up as approximately 18% for Chautauqua County; 32% to the City of Dunkirk and 49% to the Dunkirk Schools. NRG’s payments are the single largest source of revenue for the city of Dunkirk, representing 23% of its overall funding stream. Without these payments, the city, schools and county would be forced to cut critical programs and services that local residents depend on, and local taxpayers would experience a tax increase to cover the loss of this critical revenue. In contrast, NRG’s net income was $197 million last year, and its PILOT obligations for the next few years are approximately $8.6 million a year, which is only 4.3% of NRGs annual net income. Schumer is calling on NRG to live up to its obligations in the coming years, and continue to make full PILOT payments to the local community, in the event that the plant is mothballed after PSC’s review of NRG’s application.
Schumer highlighted that NRG recently made upgrades to the Dunkirk plant, including a $200 million investment to better meet new emission standards. These upgrades could allow NRG’s Dunkirk plant to generate a great deal of revenue in a few years, when plants in the Midwest that failed to make these upgrades go offline. The closing of these plants could make NRG even more profitable. Banking on the potential for greater profit margins in the future, Schumer stated that the company’s mothball application is simply an attempt by the company to save money and avoid PILOT payments while it is temporarily closed. Schumer argued that it is particularly disturbing given that in April 2009, NRG raised $58.5 million in federal tax-exempt bonds, through its Dunkirk Power LLC subsidiary, in order to make these state-of-that art emission control upgrades at the facility. The bonds were issued by the County of Chautauqua Industrial Development Agency, and NRG utilized their PILOT agreement with the county in order to leverage such generous financing.
NRG filed its mothball application with the Public Service Commission on March 14th, and the application is currently undergoing a 6 month review process. The review will concludewith a recommendation from the PSC for how much power the Dunkirk plant needs to produce to keep the grid reliable. At that point National Grid will be required by law to buy that much power from the plant. If the reliability number determined by the PSC is lower than the threshold that triggers full PILOT payments, then NRG could skip out on payments. The local impact and economics of such mothballing the Dunkirk cannot be considered in PSC’s decision-making process. Instead, Schumer stated that NRG must be a responsible corporate citizen and not skip out on these full payments. Schumer pointed out that ideally the PSC will determine the plant is needed for the reliability of the grid, an effort that has been spearheaded by County Executive Greg Edwards, but in the event that PSC determines it is safe to mothball the plant Schumer does not want NRG to skip out on its obligations to the local community.
“As a receiver of significant taxpayer-subsidized support, the bottom line is NRG must be a responsible corporate citizen and continue to make its PILOT payments, which are so critical to the Dunkirk and Chautauqua community it calls home,” said Schumer.
In a personal letter to NRG CEO David Crane, Schumer urged NRG to meet its obligations to the Dunkirk community, and to continue meeting its PILOT obligations if the mothball application is approved by the PSC in the coming months. Schumer wrote, “I urge you to meet your obligations, fulfill your responsibilities to the local community, and make your full PILOT payments. These payments amount to just a small short term loss for NRG, but by failing to make them NRG would create devastating and long term damage to the local community.”
A full copy of Senator Schumer’s letter appears below:
Dear Mr. Crane:
I write in an effort to help protect important services and programs currently provided by the City of Dunkirk, Dunkirk Central Schools, and Chautauqua County. As you know, on March 14th NRG filed a mothball application with the Public Service Commission for their 535 MW generating station in Dunkirk, NY. Through this mothball process it is possible that NRG will be allowed to significantly reduce the Payments in Lieu of Taxes (PILOT) it currently makes to the local governments and school district. However, despite the current process allowing NRG to avoid these payments, I urge you to consider what is best for the community and meet your obligations. If NRG continues with this process and is able to reduce its PILOT obligations it could have a devastating impact on the local community that would be simply unacceptable.
I understand that NRG recently made significant upgrades to the Dunkirk generating facility – financed in part with generous federally tax-exempt bonds – totaling almost $200 million to help comply with new emissions standards that go into effect in 2015. As a result of these upgrades and the regional impact of the new standards, it is possible that the Dunkirk generating facility will be a major revenue generator for NRG in just a few short years. Since there is an opportunity that the plant becomes profitable again soon, it appears disingenuous to attempt to use the mothball process to avoid making PILOT payments to localities in the interim.
I urge NRG to be a good and fair community partner for the residents of Dunkirk and Chautauqua County, and make their full PILOT payments. This past year alone NRG’s net income was $197 million and its PILOT obligations for the next few years aren’t more than $8.6 million a year, or 4.3% of NRGs annual net income. While these payments make up just a small part of NRG’s balance sheet, they make up a major part of the localities budgets. The payments NRG makes to the City of Dunkirk alone represents 23% of the city’s overall funding stream. Without this money the city, school, and county would be forced to cut vital services that community members depend on.
NRG and its Dunkirk facility are important to the fabric of the Dunkirk community. NRG employs local residents, helps to drive the local economy, and it should not tarnish its longstanding relationship with the Dunkirk community by turning its back on its PILOT obligations for the next few years. I urge you to meet your obligations, fulfill your responsibilities to the local community, and make your full PILOT payments. These payments amount to just a small short term loss for NRG, but by failing to make them NRG would create devastating and long term damage to the local community.
I am hopeful that you will reconsider the path you have currently undertaken and do the right thing for the residents of Dunkirk and Chautauqua County.